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Over the past fifteen years, the world's perception of the competence of U.S. companies in managing technology has come full circle. In 1967, a Frenchman, J.-J. Servan-Schreiber, expressed with alarm in his book, The American Challenge, that U.S. technology was far ahead of the rest of the industrialized world.1 This "technology gap," he argued, was continually widening because of the superior ability of Americans to organize and manage technological development.

Today, the situation is perceived to have changed drastically. The concern now is that the gap is reversing: the onslaught of Japanese and/or European challenges is threatening America's technological leadership. Even such informed Americans as Dr. Simon Ramo express great concern: In his book, America's Technology Slip, Dr. Ramo notes the apparent inability of U.S. companies to compete technologically with their foreign counterparts.2 Moreover, in the best seller The Art of Japanese Management, the authors use as a basis of comparison two technology-based firms: Matsushita (Japanese) and ITT (American).3 Here, the Japanese firm is depicted as a model for managers, while the management practices of the U.S. firm are sharply criticized.

Nevertheless, a number of U.S. companies appear to be fending off these foreign challenges successfully. These firms are repeatedly included on lists of "America's best-managed companies." Many of them are competitors in the R&D intensive industries, a sector of our economy that has come under particular criticism. Ironically, some of them have even served as models for highly successful Japanese and European high-tech firms.

For example, of the forty-three companies that Peters and Waterman, Jr., judged to be "excellent" in In Search of Excellence, almost half were classified as "high technology," or as containing a substantial high-technology component.4 Similarly, of the five U.S. organizations that William Ouchi described as best prepared to meet the Japanese challenge, three (IBM, Hewlett-Packard, and Kodak) were high-technology companies.5 Indeed, high-technology corporations are among the most admired firms in America. In a Fortune study that ranked the corporate reputation of the 200 largest U.S. corporations, IBM and Hewlett-Packard (HP) ranked first and second, respectively.6 And of the top ten firms, nine compete in such high-technology fields as pharmaceuticals, precision instruments, communications, office equipment, computers, jet engines, and electronics.

The above studies reinforce our own findings, which have led us to conclude that U.S.

4. See T. J. Peters and R. H. Waterman, Jr., In Search of Excellence (New York: Harper and Row, 1982). For purposes of this article, the high-technology industries are defined as those which spend more than 3 percent of sales on R&D. These industries, though otherwise quite different, are all characterized by a rapid rate of change in their products and technologies. Only five U.S. industries meet this criterion: (1) chemicals and Pharmaceuticals; (2) machinery (especially computers and office machines); (3) electrical equipment and communications; (4) professional and scientific instruments; and (5) aircraft and missiles. See National Science Foundation, Science Resources Studies Highlights, NSF81-331, December 31, 1981, p. 2.

5. See W. Ouchi, Theory Z: How American Management Can Meet the Japanese Challenge (New York: John Wiley & Sons, 1980).

8. A similar conclusion was reached by Romanelli and Tushman in their study of leadership in the minicomputer industry, which found that successful companies alternated long periods of continuity and inertia with rapid reorientations. See E. Romanelli and M. Tushman, "Executive Leadership and Organizational Outcomes: An Evolutionary Perspective," Management of Technological Innovation Conference Proceedings (Worcester Polytechnic Institute, 1983).

9. One of the authors in this article has employed this framework as a diagnostic tool in audits of high-technology firms. The firm is evaluated along these six dimensions on a 0—10 scale by members of corporate and divisional management, working individually. The results are then used as inputs for conducting a strategic review of the firm.

10. General Electric evidently has also recognized the value of such concentration. In 1979, Reginald Jones, then GE's CEO, broke up the firm into six independent sectors led by "sector executives." See R. Vancil and P. C. Browne, "General Electric Consumer Products and Services Sector" (Boston, MA: Harvard Business School Case Services 2-179-070).

12. After only eighteen months as Geneen's successor as president, Lyman Hamilton was summarily dismissed by Geneen for reversing Geneen's way of doing business. See G. Colvin, "The Re-Geneening of ITT," Fortune, 11 January 1982, pp. 34-39.

13. See "RCA: Still Another Master," Business Week, 17 August 1981, pp. 80-86.

17. These SAPPHO findings are generally consistent with the results of the Stanford Innovation Project, a major comparative study of U.S. high-technology innovation. See M. A. Maidique, "The Stanford Innovation Project: A Comparative Study of Success and Failure in High Technology Product Innovation," Management of Technology Conference Proceedings (Worcester Polytechnic Institute, 1983).

18. See: Maidique and Zirger (in press); Several other authors have reached similar conclusions. See, for example, Peters and Waterman (1982).

29. See: Texas Instruments (A), 9-476-122, Harvard Business School case; Texas Instruments Shows U.S. Business How to Survive in the 1980's, 3-579-092, Harvard Business School case; Texas Instruments "Speak and Spell Product," 9-679-089, revised 7/79, Harvard Business School case.

30. Arthur K. Watson, Address to the Eighth International Congress of Accountants, New York City, September 24, 1962, as quoted by D. A. Shon, "Champions for Radical New Inventions," Harvard Business Review, March-April 1963, p. 85.

53. After reviewing an early draft of this article, Ray Stata wrote, "The articulation of dynamic balance, of ying and yang,... served as a reminder to me that there isn't one way forever, but a constant adaption to the needs and circumstances of the moment." Ray Stata, president, Analog Devices, letter of 29 November 1982.

54. Quoted in "Some Contributions of James E. Webb to the Theory and Practice of Management," a presentation by Elmer B. Staats before the annual meeting of the Academy of Management on 11 August 1978.

About the Author

Robert H. Hayes is Professor of Business Administration at the Graduate School of Business Administration at Harvard University. Dr. Hayes holds the B.A. degree from Wesleyan University and the M.S. and Ph.D. degrees from Stanford University. He has consulted widely on issues of manufacturing strategy and has published articles in the Harvard Business Review. Dr. Hayes is the author of the forthcoming book, Restoring Our Competitive Edge: Competing through Manufacturing, to be published by John Wiley & Sons.Modesto A. Maidique is Associate Professor of Engineering Management at Stanford University. Dr. Maidique holds the B.S., the M.S., and the Ph.D. degrees from M.I.T,, and the P.M.D. degree from Harvard University. His teaching and research interests center on the management of the technological firm. He is a member of the Institute of Electrical and Electronics Engineering and is listed in Who’s Who in Finance and Industry. Dr. Maidique is the author of numerous articles published in such journals as Harvard Business Review, California Management Review, and Technology Review.